Material Impacts On The Precision Machining Industry - February 2009

The raw materials that we track are leading indicators for the precision turning industry. From their highs in 2008, to December 2008, these materials varied from 59% to 77%. High variability is problematic for trying to support fixed price contracts. Inventories are tight on most materials, with Service Center inventories at 17 year lows for steel and aluminum products according to MSCI. It is easy to be grim at the bottom of a market. What is critical for us as managers is to recognize that bottom and prepare for success as our markets improve. Having access to materials that are in very short supply due to the current inventory and credit lows may be what brings your company success on the way out of this recession.What are you doing now to assure you will have the materials that you need when the phone begins to ring?


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Raw Materials Pricing Variability Inhibits Firm Pricing

Quick Summary: The prices of the raw materials that we track are varying from 59% to 77% from their 2008 high to December 2008 low.

Price swing (Δ) from December 2008 to January 2009:
Aluminum: 31.4% price variation (Δ)
Copper, a mere 28% swing same time frame.
Nickel: 55% swing in the same period .
Steel, 62% swing with in the same 2 month period.
China Coke, 29.6%.

If we can’t get stable prices for raw materials, how can we possibly offer firm prices to our customers? If we are at the bottom of the bottom of the current mess, savvy shops will be figuring out right now what are the key materials and supplies that they need to have in house when the orders “Gotta have it now!” are screamed in later this year. Hope you’re working on it, because the orders will be back sooner than many expect. And the latest MSCI report shows steel inventories at a 17 year low.

According to what we were taught in economics class, when the inventories of available
materials are low, and all of a sudden, the demand is back, prices generally trend… UP!

Please see the January Asian Currency Monitoring Report.

Read the complete Material Impacts Report (PDF format): Material Impacts On The Precision Machining Industry - February 2009.